"*" indicates required fields

Subscribe

This field is for validation purposes and should be left unchanged.

By subscribing you agree to our Privacy Policy

Subscription Settings
Analysis

The Politics of Leverage: Bond Issuances, Debt Dynamics, and State Finances in the Gulf

The underlying economic factors driving debt issuances, issues related to how raised funds are redeployed within local economies, and the implications of looming debt maturities help to paint a comprehensive picture of the state of Gulf Arab economies.

'Saudi Minister of Finance Mohammed Al-Jadaan speaks during Euromoney Saudi Arabia Conference, in Riyadh, Saudi Arabia, May 2, 2018. (REUTERS/Faisal Al Nasser)'

Executive Summary

Sovereign and corporate bond issuances proved to be crucial economic policy tools and financial instruments in Gulf Arab states during the extraordinary economic challenges of 2020. While there were several major bond deals announced in early 2021, the pace of issuances and eagerness to tap international bond markets is poised to slow across the Gulf for the second half of 2021 and into 2022. Bond issuances and their future implications will remain a central feature of the political economy of Gulf Arab states, but the urgency for most Gulf governments to raise funding from international capital markets has diminished following higher oil prices and rosier economic growth forecasts. Another sustained slide in oil prices, however, would renew pressure on government finances and likely increase the need for debt issuances.

The highest-rated sovereign issuers, such as Abu Dhabi and Qatar, are in the privileged position of accessing cheap debt opportunistically. Saudi Arabia continues to enjoy strong demand for its sovereign bonds, but the state’s total financing needs remain considerable. Despite shakier finances, investors continue to view Omani bonds favorably, given the sultanate’s fiscal reform trajectory, regular issuances, and solid yields. Bahrain combines high levels of government debt with an uncertain fiscal reform status, but previous external support from Gulf Cooperation Council member states – as well as the prospect of future economic aid packages – has helped the small country maintain access to capital markets. Kuwait’s government and Parliament have been unable to agree on a new debt law, which has prevented Kuwait from issuing bonds since 2017.

Commercial entities across the Gulf Arab states, especially those in the energy sector, took advantage of strong demand for corporate debt in 2020-21. With the expectation for fewer funding commitments from regional governments, there are concerns that the debt held by some regional government-related entities may be headed toward unsustainable levels. Multibillion-dollar external sovereign debt maturities are looming for Oman and Bahrain over the coming years, but they, and other Gulf states, will have the option to refinance or restructure this debt. Meanwhile, Islamic bonds are in high demand and their market is underserved, creating cost-effective opportunities for Gulf-based issuers.

Read full paper

The views represented herein are the author's or speaker's own and do not necessarily reflect the views of AGSI, its staff, or its board of directors.

Robert Mogielnicki

Senior Resident Scholar, AGSI

Analysis

Gulf Economies and the Tariff Storm

Trump’s tariff agenda may complicate Gulf governments’ capabilities to advance key policy initiatives and strategic economic partnerships, including Gulf investments in the United States.

Robert Mogielnicki

13 min read

Oil Prices and Gulf Economic Policymaking

The oil price environment remains manageable but looks increasingly uncomfortable for some Gulf states.

Robert Mogielnicki

20 min read

Saudi Arabia on Global Stage for 2034 World Cup

Hosting the World Cup will be a huge opportunity for Saudi Arabia, supporting Vision 2030 reforms. While preparations for the tournament will be costly, they will boost economic growth and could spur further social change.

13 min read

Trump’s Commercial Influence in the Gulf

Whether or not former President Donald J. Trump wins the presidency for a second time, his commercial brand will remain a visible feature of the Gulf region.

Part of a sign is seen at the entrance of Trump International Golf Club in Dubai, United Arab Emirates, November 8, 2020. (REUTERS/Christopher Pike)
View All

Events

May 8, 2025

From Petrodollar Partners to Geo-Economic Rivals? Washington and the Arab Gulf States

On May 8, AGSIW hosted a discussion on how U.S. geoeconomic policy is reshaping ties with Gulf states.

President Donald J. Trump shakes hands with Saudi Arabia's then deputy crown prince and defense minister, Mohammed bin Salman, during a bilateral meeting, in Riyadh, May 20, 2017. (AP Photo/Evan Vucci, File)
President Donald J. Trump shakes hands with Saudi Arabia's then deputy crown prince and defense minister, Mohammed bin Salman, during a bilateral meeting, in Riyadh, May 20, 2017. (AP Photo/Evan Vucci, File)

Jan 23, 2025

Outlook 2025: What Will the New Year Bring for the Gulf Region and U.S.-Gulf Relations?

On January 23, AGSIW hosted a discussion on what regional trends they’ll be following most closely as the year unfolds.

Foreign ministers and delegates pose for a family photo after their meeting on Syria, following the recent ousting of President Bashar al-Assad, in Riyadh, Saudi Arabia, January 12. (Saudi Press Agency/Handout via REUTERS)
Foreign ministers and delegates pose for a family photo after their meeting on Syria, following the recent ousting of President Bashar al-Assad, in Riyadh, Saudi Arabia, January 12. (Saudi Press Agency/Handout via REUTERS)

Jan 16, 2025

Follow the Money: Unpacking GCC Sovereign Wealth Fund Investment Activity

On January 16, AGSIW will host a discussion on the evolution of Gulf sovereign wealth fund investment.

A general view of Abu Dhabi, United Arab Emirates, January 3, 2019. (REUTERS/ Hamad I Mohammed)
A general view of Abu Dhabi, United Arab Emirates, January 3, 2019. (REUTERS/ Hamad I Mohammed)

Oct 22, 2024

Roundtable With Oman’s Ministry of Finance

On October 22, AGSIW hosted a discussion on Oman's economic reforms.

Omani women stand in the hotel lobby in the newly developed property, Al Mouj Muscat, in Muscat, Oman, February 11, 2019. (REUTERS/ Hamad I Mohammed)
Omani women stand in the hotel lobby in the newly developed property, Al Mouj Muscat, in Muscat, Oman, February 11, 2019. (REUTERS/ Hamad I Mohammed)
View All